"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost

Wednesday, January 4, 2017

Tea and Trade

Tonight, I walked into a small Indian or Pakistani-owned grocery store and had a epiphany about globalization. Seeing an entire row of teas of superior quality that most Americans will never see made me realize that despite much increased trade, actual diversity of products hasn't reached the average consumer. And that's just the teas--a very simple product.

In short, adult voters in developed countries are suffering from twin headwinds: 1) they see traditional manufacturing jobs lose ground to services-based and technology jobs--without having the educational or training opportunities to enter those faster-growing sectors; and 2) they do not see sufficiently tangible benefits of allowing competition from foreign countries, especially in countries with lower living costs (which allow for lower wages).

The result of globalization should be more choices and labor mobility, not just lower prices. Right now, most consumers have the illusion of choice because a few major companies own most media and the tangible products they use. To take one example, Disney owns not just ABC, but Nickelodeon and ESPN--as well as Pixar. The reason such consolidation has occurred isn't just lax anti-trust enforcement and IPO monies, but the complexity of trade agreements, tariffs, and other impediments to "free" trade. Media consolidation is particularly troubling because it means a small group of companies can influence your consumer choices based on whether they highlight x product rather than y product under a system driven not by quality but by whomever can pay the highest ad dollar. Basically, the current advertising system generates greater demand and recognition for a few companies, which then influences shelf space in retail outlets, which then creates self-reinforcing product "choices" based on a very narrow set of influencers.

Moreover, large companies have legal teams that can comply with increasingly complex regulations purportedly designed to help the public but that disadvantage smaller competitors who lack the consistent revenue or access to the corporate loan market to fund legal teams that can expertly find loopholes or survive prolonged litigation. In other words, laws, once they become complex and costly to defend, hurt the consumer by reducing competition and therefore consumer choice. They also divert revenue to "outsiders" (lawyers, insurance companies, etc.) without any improvement for the consumer. (I've advocated that most civil laws with private rights of action, except for harassment, should not apply to companies with fewer than x employees or less than x gross revenue, but that's a post for another time. Criminal laws, of course, would still apply, such as fraud.)

In the current era of so-called "free trade," a small grocery store--using eBay, Alibaba, or personal contacts--may have more food diversity than a Walmart or Kroger's in terms of the origin of their products but may need to pay a much higher share of revenue to insurance companies to prevent bankruptcy due to chance events, without any guarantee that the policy will cover the specific event feared; or choose to operate in the informal economy; or hire only close friends and family. This is not what globalization promised. It was not supposed to restrict labor choices while enriching the investor and lawyer classes at the expense of the worker class and rendering the government impotent and feckless. It was not supposed to cause government employees to create separate and unequal disciplinary and compensation systems while increasing taxes to pay for guaranteed benefits unavailable to private sector workers. It certainly was not supposed to promote an educational-governmental complex designed to trick voters into forking over more tax dollars to sustain a K-12 system that fails to impart any practical or critical-thinking skills.

The challenge now is to figure out how to use globalization and laws to increase labor mobility and truly diverse choices without using government power to coerce outcomes or pick winners and losers. Thus far, voters outside large cities can sense that the promises of globalization "as is" will require them to accept more debt, more inflation in essential items, less accountability, and more dependence on elites. As such, they are rationally skeptical of their changing environment and the politicians who fail to address such issues head-on.

By failing to openly acknowledge globalization's current problems, politicians of all stripes are promoting dystopia and endangering the concept of democratic rule. As a strong supporter of globalization, I fear its tendency towards "sameness" (i.e., shopping malls and high rise condos everywhere) but have never questioned its promise: a world where we can experience other cultures and ideas in ways never before possible. If done properly, greater connectivity and technology could bring the end of war, famine, and disease--but only if done in ways that promote stability (such as a universal basic income), accountability, and tangible benefits to the average consumer.

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